An 18-year-old German-Iranian man opened fire in a crowded Munich shopping mall and a nearby McDonald's killing nine people and wounding 16 others before killing himself, the chief of police in the Bavarian capital said on Saturday.

Police gave a "cautious all clear" early on Saturday morning, more than seven hours after the attack began, and brought much of the city to a standstill as all public transit systems were shut down amid a massive manhunt. They said a body found near the scene was that of the shooter and he appeared to have acted alone.

Munich police chief Hubertus Andrae told a news conference the suspect was a dual citizen from Munich and his motive was still "fully unclear".

Mr Andrae said the suspect's body was found about 2 1/2 hours after the attack and was identified to be the shooter based on witness statements and closed circuit television footage of the attack. He was not previously known to police and there was no evidence of any links to terrorist organisations, Mr Andrae said.

Witnesses had reported seeing three men with firearms near the Olympia Einkaufszentrum mall. However, the police chief said two people who fled the area quickly were investigated but had "nothing to do with the incident".

Mr Andrae said the nine fatalities included young people and children were among the 16 wounded, three of whom were in critical condition.

After gunfire broke out at the mall, one of Munich's largest, the city sent a smartphone alert declaring an "emergency situation" and telling people to stay indoors, while all rail, subway and tram services were halted in the city.

It was the third major act of violence against civilians in Western Europe in eight days. The previous attacks, in the French resort city of Nice and on a train in Bavaria near the city of Wuerzburg, were claimed by the Islamic State group.

While police initially called the mall shooting an act of terrorism, they said they had "no indication" it involved Islamic extremism and at least one witness said he heard a shooter shout an anti-foreigner slur.

"The question of terrorism or a rampage is tied to motive and we don't know the motive," Mr Andrae said. "We can't question the suspect so this is all a little more difficult."

Mr Andrae said inquiries suggested the suspect had lived in the city for more than two years and is not thought to have been known to law enforcement agencies.

"As to the background or motive of the offence, it's totally unclear. The investigations will be running on all cylinders through the night," Mr Andrae said.

Germany has been on high alert after a teenage asylum seeker attacked people with an axe on a train on Monday, injuring five.

'Fake game lured people into McDonald's'

During the Munich police's press conference a journalist asked a question about a rumoured "fake game" which may have lured people into the McDonald's that was then attacked with a promise of free meals.

Police chief Andrae said that authorities were aware of it but couldn't say if there was any connection with the attack.

Austria steps up border security

AFP: Austria has "significantly" tightened security measures along its border with Germany and put an elite police force on high alert following the Munich mall attack, a government security chief said Friday.

Germany and Austria share hundreds of kilometres of frontier, including along the state of German Bavaria, where the attack occurred.

"Police have significantly increased security measures so they are poised and fully ready to act," public security chief Konrad Kogler told state broadcaster ORF, without elaborating.

He added that 42 elite so-called "Cobra" officers have been dispatched to Munich to assist police in their hunt for gunmen who killed at least eight people in a shooting rampage at a shopping centre in Munich.

"The entire Cobra team has been placed on high alert so that they are ready to jump into action," Kogler said.

He added there were "no concrete indications" of an imminent threat in Austria and the current terror threat level has not been increased.

The country has been on raised alert since last January's deadly attack on the Charlie Hebdo satirical weekly offices in Paris.

Munich remains on lockdown - with people told to stay at home

'Too early to say whether a jihadi attack'

Yassin Musharbash, a terrorism analyst for Die Zeit, has been speaking to BBC Newsnight

He said:

Everybody here was on high alert already [after the train attack].

Most people assumed immediately it was most likely a jihad attack but we do not know at this point, it’s too early to say.

On refugees being invited into the country:

Munich was where most of the refugees poured into last year. There’s a reason we call Munich the city of hearts – it’s possible this reputation the city holds is something a jihadi cell would like to undermine.

We could be talking about a disturbed individual. There was a video with a confusing dialogue with an onlooker which could point towards an attacked with mental health issues.

Shadow Foreign Secretary responds

Emily Thornberry, the shadow Foreign Secretary, has issued this statement:

While it is unclear at this stage how many innocent people have been killed or injured, how many gunmen are involved, or what twisted motivation they hold, we can say one thing with certainty: anyone who tries to commit indiscriminate, mass murder against ordinary men, women and children going about their daily lives stands for nothing but evil.

Our response cannot be to let them win by changing the way we live, or reacting ourselves with hatred and intolerance.

We must stand defiant to protect our way of life, and we must take determined and unified action against anyone who wants to destroy it."

Obama has been briefed on Munich

Islamic State supporters celebrate on social media

(Reuters) - Supporters of the Islamic State jihadi group celebrated on social media a shooting rampage in a shopping mall in the southern German city of Munich on Friday that killed and wounded many people.

"Thank God, may God bring prosperity to our Islamic State men," read one tweet in Arabic on an account that regularly favours the radical Islamist movement.

"The Islamic State is expanding in Europe," read an Arabic-language tweet on another account also known to support the group.

The attack was the third major act of violence against civilian targets in Western Europe in eight days. Previous attacks in France and Germany were claimed by Islamic State and Munich police said they suspected the latest assault was a terrorist attack.